Sigma has issued a US$1bn bond with a 10 year tenor. The offering attracted large demand from investors, with oversubscriptions totalling US$3.5bn. The proceeds of the issuance will be used to repay debts maturing between 2016 and 2018.
Initial price thoughts for the deal were 262.5bp. The high demand for the company’s bond allowed for pricing of 225bp, at the tight end of the official guidance which was in the 235bp area.
“The diversification in the company’s sources of funding and its lower leverage as a result has contributed to the tight pricing of the bond,” said Michel Galvez, Head of Credit Research at Grupo Bursatil Mexicano.
Galvez noted that the company is able to successfully access the debt markets because of the range of financing options available to it, which include not only funds from Alpha, the parent company, but also through open credit lines with banks.
The company is highly rated within Latin America. Moody’s gives the corporate a rating of Baa3, whilst Standard & Poor’s and Fitch both give the company a BBB rating.
The pricing on Sigma’s bond is actually tighter than the corporate’s holding company. Alpha’s 2024 notes are trading between 260bp and 265bp. The parent company also has a slightly lower credit rating from S&P and Fitch, rated at BBB-.
“The holding company has much more capital exposure than Sigma, which explains why the pricing on Sigma’s bond was narrower than that on Alpha’s note,” said Galvez.
However, there are concerns over the level of exposure the company has to foreign currency denominated debt, to which this new issue has added. Of the company’s total debt, 72% is denominated in US dollars, and 24% in euros.
The company currently has US$450mn and US$250mn in outstanding bonds due in 2018 and 2019 respectively, and a €498mn bond due in 2022.
Despite this, Galvez noted that in 2015, 43% of the company’s revenues came from Mexico, with 36% from Europe and only 15% from the US.
The lead managers on the transaction were JP Morgan and Bank of America Merrill Lynch. Passive joint bookrunners on the deal were MUFG and Rabo Securities.